When it comes to health care
, there are plenty for investors to choose from. How well
acquainted folks are with all of their options in this sector is
another story. Sure, it is safe to say that most investors know of
the Health Care Select Sector SPDR (NYSE:
), the Vanguard Health Care ETF (NYSE:
) and the iShares Nasdaq Biotechnology Index Fund (NASDAQ:
Beyond that trio and a couple of other funds, many health care
ETFs toil in relative anonymity. However, in some cases, the
obscurity of some unknown health care ETF belies the solid returns
these funds have generated. In fact, some of the following ETFs
have recently outperformed their more well-known rivals. That begs
the question: Why has your broker forgotten to mention them?
First Trust Health Care AlphaDEX Fund (NYSE:
) While the First Trust Health Care AlphaDEX Fund may not be the
first health care ETF investors and the mainstream financial media
think of, this fund is by no means small or thinly traded. FXH has
over $629 million in assets under management and has traded an
average of almost 258,500 shares per day over the last month,
according to First Trust data
As is the case with the other AlphaDEX fund, FXH's constituents
are screened on momentum and value factors such as one year sales
growth and book value to price. Unlike VHT and XLV, FXH's holdings
are not excessively tilted toward blue-chip pharmaceuticals names.
Rather, FXH offers broader exposure to biotechnology, health care
providers and equipment makers as well pharmaceuticals names. The
combination seems to be working as FXH has sharply outperformed VFH
and XLV over the past year.
Market Vectors Pharmaceutical ETF (NYSE:
) PPH can be viewed as the ETF that is perfect for the indecisive
pharmaceuticals investor. The ETF's 26-stock lineup reads like a
who's who of popular large-cap pharma stocks. Any other sub-sector
exposure offered by PPH, be it biotechnology or health care
equipment, comes by virtue of some of the ETF's holdings operating
in those industries, not through pure plays on those themes.
Dow components Johnson & Johnson (NYSE:
) and Pfizer (NYSE:
) combine for over 19 percent of PPH's weight while other top-10
holdings include Merck (NYSE:
), Abbott Labs (NYSE:
) and Teva Pharmaceuticals (NASDAQ:
). The rub with PPH is twofold. First, the ETF lagged FXH, VHT and
XLV by wide margins in 2012. Second, the dividend yield is less
than 2,7 percent,
to Market Vectors data
, indicating income investors could do better with individual
stocks such as Johnson & Johnson and Pfizer.
PowerShares Dynamic Biotechnology & Genome Portfolio (NYSE:
) The conversation about biotech ETFs usually revolves around three
funds: The aforementioned IBB, the SPDR S&P Biotechnology ETF
) and the First Trust NYSE Arca Biotech Index Fund (NYSE:
). That makes sense as that trio represents the largest biotech
ETFs by assets and in 2012, XBT and FBT were among the
best-performing sectors funds of any kind.
Interestingly, PBE shares something in common with FXH, that
being both eschew traditional cap-weighting of their holdings.
PBE's 30 holdings, which include familiar names such as Amgen
) and Gilead Sciences (NASDAQ:
), are screened on criteria including price momentum, earnings
momentum, quality, management action, and value,
according to PowerShares
Investors should note over 45 percent of PBE's weight goes to
small-cap names, implying the ETF could get a lift from new drug
approvals and/or increased biotech mergers and acquisitions
activity. The other side of that coin is that there are no
guarantees those scenarios will materialize.
iShares MSCI ACWI ex US Health Care Sector Index Fund (NYSE:
) The iShares MSCI ACWI ex US Health Care Sector Index Fund is the
smallest ETF on this list with just $9.85 million in AUM, but that
has not stopped the fund from gaining almost 17 percent in the past
year. AXHE is true to its name in that none of its 69 holdings are
based in the U.S., although plenty trade here, including Teva,
) and GlaxoSmithKline (NYSE:
Like PPH, AXHE sports a dividend yield in the 2.7 percent area,
barely more than half of what GlaxoSmithKline American depositary
receipts yield. AXHE is also somewhat pricey, at least based on its
price-to-book ratio, which is 5.95. AXHE has a beta of 0.94 against
the S&P 500,
according to iShares data
For more on ETFs, click
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